July 21, 2016 – Marquez v. Larrabee, No. 33,370

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 	_______________
Filing Date: July 21, 2016
NO. 33,370
HENRY P. MARQUEZ,
Plaintiff-Appellee,
v.
FRANK LARRABEE and
LARRABEE, INC., a New Mexico
Corporation, G&D CONSTRUCTION, INC.,
a New Mexico Corporation, and
MELVILLE HEDGES, and JUANITA
GAIL HEDGES, husband and wife,
GALEN LARRABEE,
Defendants-Appellants.
APPEAL FROM THE DISTRICT COURT OF SANDOVAL COUNTY
George P. Eichwald, District Judge
Barnett Law Firm
David A. Garcia
Albuquerque, NM
for Appellee

Law Offices of Nancy L. Simmons, P.C.
Nancy L. Simmons
Amanda Lavin
Albuquerque, NM
for Appellants

OPINION
HANISEE, Judge.
{1} 	Defendants-Appellants G & D Construction, Inc., Melville Hedges, Juanita Gail
Hedges, Frank Larrabee and Larrabee Inc. appeal from the district court’s denial of
their motion to set aside a default judgment under Rule 1-060(B)(6) NMRA. The
district court entered the default judgment as a sanction pursuant to Rule 1-
037(B)(2)(c) NMRA and awarded Plaintiff compensatory and punitive damages as
well as attorney fees and costs. Although the conduct of Defendants’ attorney may
have warranted the district court’s sanction, we hold that the district court abused its
discretion in denying Defendant’s motion to set aside the default judgment without
making findings of fact as to Defendants’ own diligence in pursuing their defenses
and awareness of their attorney’s conduct. We therefore vacate the district court’s
default judgment and remand this case for further proceedings.
BACKGROUND
{2} 	Plaintiff’s lawsuit alleges that Defendants sold a house to Plaintiff that suffered
from numerous construction defects in violation of various warranties that Defendants
had made to Plaintiff in the purchase agreement and other documents. Shortly after
discovery began, it became apparent that Defendants’ attorney, Peter Everett IV, was
incapable of discharging his responsibilities as Defendants’ representative and an

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officer of the court.
{3} 	From September 2012 and throughout the duration of the underlying litigation,
Mr. Everett underwent several major surgeries and was under the influence of narcotic
pain killers at the direction of his physician. Mr. Everett also explained that he
represented 	Defendants 	Gail 	and 	Melville 	Hedges 	(the 	Hedges) 	during 	the
negotiations with Plaintiff for the purchase of the home that became the subject of the
litigation. As Mr. Everett acknowledged, this rendered him a fact witness, prohibiting
him from representing any of the parties named as Defendants in Plaintiff’s lawsuit.
The record thus reflects Mr. Everett’s own concern that his status as a fact witness and
his use of narcotic pain killers undermined his ability to adequately discharge his
duties as an advocate on all of his clients’ behalf.
{4} 	Despite his concerns, however, Mr. Everett did not withdraw from representing
Defendants or seek to obtain substitute counsel. Mr. Everett went on to file numerous
frivolous motions and other pleadings, refused to participate in discovery, and failed
to appear for scheduled hearings on important pretrial motions and discovery matters.
Mr. Everett also verbally abused and threatened Plaintiff’s attorney in open court,
attacked the integrity of the district court, and otherwise acted in a matter unbecoming
of a licensed attorney, who is an officer of the court as well as his clients’ advocate.
See In re Chavez, 2013-NMSC-008, ¶ 26, 299 P.3d 403.

1The record is unclear as to whether Defendants were ever personally served
with the subpoenas or the district court’s order granting Plaintiff’s motions to compel.
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{5} 	The district court’s decision to enter a default judgment against Defendants was
ultimately occasioned by Plaintiff’s inability to obtain discovery. Repeatedly,
Defendants had failed to appear for depositions and failed to produce documents
requested by Plaintiff. This gave rise to several motions to compel, which the district
court granted.1 Still, Defendants failed to appear at depositions or produce documents
that the district court ordered, and eventually Plaintiff moved the district court to enter
a default judgment against Defendants for failing to comply with an order compelling
discovery. See Rule 1-037(B)(2)(c) (“If a party . . . fails to obey an order to provide
or permit discovery, . . . the court in which the action is pending may make . . . an
order . . . rendering a judgment by default against the disobedient party[.]”). The
district court scheduled a hearing on the motion, notice of which was sent both to Mr.
Everett and Defendants personally. Neither Defendants nor Mr. Everett appeared at
the hearing, and the district court granted Plaintiff’s motion for a default judgment.
The court scheduled another hearing on the amount of damages that Plaintiff ought
to be awarded, notice of which was again served on both Mr. Everett and Defendants
personally. Neither Defendants nor Mr. Everett appeared at the damages hearing. On
May 30, 2013, the district court entered a default judgment against Defendants in
Plaintiff’s favor and awarded Plaintiff $648,124.27 in compensatory damages, unpaid

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court sanctions in the amount of $3,150, attorney fees of $48,255.87, and punitive
damages in the amount of $300,000 for “willfully and intentionally thwarting every
effort by the Plaintiff in its discovery process.”
{6} 	On June 7, 2013, Defendants filed a motion to set aside the default judgment.
The district court held a hearing on the motion on September 20, 2013. At the hearing,
Mr. Everett explained that he was in intensive care when the district court heard
arguments on Plaintiff’s motion for a default judgment. Mr. Everett also appeared to
dispute Plaintiff’s claim that he had not participated in discovery, saying that
Defendants had “responded to every bit of discovery[,]” but that “Mr. Larrabee had
no other documents to give.” The district court did not accept Mr. Everett’s
explanation, and refused to set aside its default judgment against Defendants.
Defendants now appeal the district court’s denial of their motion to set aside the
default judgment.
DISCUSSION
{7} 	Defendants raise four issues on appeal: (1) whether a default judgment was an
appropriate sanction under Rule 1-037; (2) whether the district court abused its
discretion in refusing to grant Defendants’ motion to set aside the default judgment
under Rule 1-060(B)(6); (3) whether Rule 1-037 permits the assessment of punitive
damages as a sanction for discovery violations; and (4) whether the district court

2We note that under the current version of Rule 12-201(D), a motion under Rule
1-060(B) filed within 30 days of a judgment extends the time for filing a notice of
appeal until the motion is withdrawn or denied. Given the amendments to Rule 12-
201(D), it appears that Capco Acquisub, Inc. is no longer a correct statement of the
law. However, because the judgment in this case and the district court’s denial of
Defendants’ Rule 1-060(B) motion occurred before current Rule 12-201(D) came into
effect, the rule in Capco Acquisub, Inc. applies.
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abused its discretion in awarding Plaintiff attorney fees and costs as a sanction under
Rule 1-037.
{8} 	As an initial matter, we note that Rule 12-201(A)(2) NMRA requires a party to
file a notice of appeal in the district court “within thirty (30) days after the judgment
or order appealed from.” But the filing of a motion to set aside a judgment under Rule
1-060 does not toll the period of time for filing a notice of appeal. See Rule 1-
060(B)(6); see also Capco Acquisub, Inc. v. Greka Energy Corp., 2007-NMCA-011,
¶ 14, 140 N.M. 920, 149 P.3d 1017 (noting that motions under Rule 1-060(B)(6) do
not fall within the enumerated exceptions in Rule 12-201(D) and (E)(4) to Rule 12-
201(A)(2)’s thirty day deadline for filing a notice of appeal). 2
{9} 	In this case, Defendants filed a notice of appeal on November 8, 2013, nearly
five months after the district court entered its default judgment. Thus, Defendants’
notice of appeal was timely only as to the district court’s denial of their motion to set
aside the default judgment under Rule 1-060, not the district court’s order granting
Plaintiff’s motion for a default judgment. Because the first, third, and fourth issues

6
raised by Defendants relate to the merits of Plaintiff’s motion for a default judgment
as a sanction for discovery violations under Rule 1-037, we conclude that Defendants
failed to timely appeal those issues. Accordingly, we address only the question of
whether the district court correctly denied Defendants’ motion under Rule 1-060.
{10} 	We now turn to the merits of Defendants’ contention that the district court erred
in denying their motion to set aside the default judgment. Rule 1-060(B) provides that
a district court may relieve a party or his legal representative from a final judgment,
order, or proceeding for the following reasons:
(1) 	mistake, inadvertence, surprise, or excusable neglect;
(2) 	newly discovered evidence which by due diligence could
not have been discovered in time to move for a new trial under Rule
1-059 NMRA;
(3) 	fraud 	(whether 	heretofore 	denominated 	intrinsic 	or
extrinsic), misrepresentation, or other misconduct of an adverse party;
(4) 	the judgment is void;
(5) 	the judgment has been satisfied, released, or discharged, or
a prior judgment upon which it is based has been reversed or otherwise
vacated, or it is no longer equitable that the judgment should have
prospective application; or
(6) 	any other reason justifying relief from the operation of the
judgment.
Rule 1-060(B)(6) further provides that a motion to set aside a judgment under Rule
1-060 “shall be made within a reasonable time, and for reasons (1), (2), and (3) not

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more than one (1) year after the judgment, order, or proceeding was entered or taken.”
Our Supreme Court has interpreted Rule 1-060(B)(6) to require “[the] party seeking
to set aside a default judgment under Rule 1-060(B)(6) [to] show the existence of
exceptional circumstances and reasons for relief other than those set out in Rules 1-
060(B)(1) through (5).” Rodriguez v. Conant, 1987-NMSC-040, ¶ 22, 105 N.M. 746,
737 P.2d 527 (emphasis added). We review the district court’s decision to grant or
deny a motion under Rule 1-060(B)(6) for an abuse of discretion. Rodriguez, 1987-
NMSC-040, ¶ 18.
{11} 	Defendants contend that Mr. Everett’s gross negligence as their attorney is an
exceptional circumstance that entitles them to relief from the default judgment entered
against them as a result of his misconduct. Generally, “mere attorney negligence
[does] not constitute exceptional circumstances for purposes of applying [Rule] 1-
060(B)(6), and a claimant’s proper recourse would be to bring a malpractice suit
against the negligent attorney.” Resolution Tr. Corp. v. Ferri, 1995-NMSC-055, ¶ 17,
120 N.M. 320, 902 P.2d 738 (citing Inryco, Inc. v. Metro. Eng’g Co., 708 F.2d 1225,
1235 (7th Cir. 1983)). “However, when an attorney’s failure rises to the level of gross
negligence, the trial court may find exceptional circumstances warranting reopening
a default judgment under [Rule] 1-060(B)(6).” Ferri, 1995-NMSC-055, ¶ 18 (citing
Jackson v. Washington Monthly Co., 569 F.2d 119, 122 (D.C. Cir. 1977); L.P. Steuart,

8
Inc. v. Matthews, 329 F.2d 234, 235 (D.C. Cir. 1964)).
{12} 	“The New Mexico Rules of Civil Procedure are modeled after the Federal Rules
of Civil Procedure, and the substance of Rule 1-060(B) is virtually identical to its
federal counterpart, Federal Rule of Civil Procedure 60(b).” Kinder Morgan CO2 Co.
v. N.M. Taxation & Revenue Dep’t, 2009-NMCA-019, ¶ 11, 145 N.M. 579, 203 P.3d
110. “Because our rule closely tracks this language, the federal construction of Rule
60(b) is persuasive authority for the construction of Rule 1-060(B).” Kinder Morgan
CO2 Co., 2009-NMCA-019, ¶ 11. In the following paragraphs, we analyze federal
circuit courts of appeal’s differing approaches to the question of whether an attorney’s
gross negligence justifies reopening a judgment under Federal Rule 60(b)(6) in order
to provide a helpful grounding to our application of New Mexico’s rule to this case.
{13} 	The minority approach, adopted by the Seventh and Eighth Circuit Courts of
Appeal, 	is 	that 	gross 	attorney 	negligence 	never 	constitutes 	an 	“exceptional
circumstance” justifying reopening of a judgment under Federal Rule 60(b)(6). See
United States v. 8136 S. Dobson St., Chicago, Ill., 125 F.3d 1076, 1083 (7th Cir.
1997); accord Heim v. Comm’r of Internal Revenue Serv., 872 F.2d 245, 248 (8th Cir.
1989). The minority approach is based on three rationales: first, “[h]olding the client
responsible for the lawyer’s deeds ensures that both clients and lawyers take care to
comply. If the lawyer’s neglect protected the client from ill consequences, neglect

9
would become all too common. It would be a free good—the neglect would protect
the client, and because the client could not suffer the lawyer would not suffer either.”
8136 S. Dobson St., 125 F.3d at 1084. Second, preventing a party from obtaining relief
from a judgment entered as a result of his attorney’s gross negligence does not leave
the party without a remedy: the party may seek recourse for the damages caused by
the execution of the judgment in a malpractice action. Id. Finally, the acts of an
attorney on behalf of his client are imputed to the client under common law principles
of agency. See Ferri, 1995-NMSC-055, ¶ 17 (stating that “all parties are deemed
bound by the acts and failures of their lawyers. Indeed, to set aside the default merely
because the defendant should not be penalized for the omissions of the attorney would
be visiting the sins of the defendant’s lawyer upon the plaintiff.” (alterations, internal
quotation marks, and citations omitted)). Under this rationale, it would seem
incongruous to hold a client responsible for the ordinary negligence of his attorney as
well as his attorney’s willful misconduct, but not for conduct that falls between these
two extremes. See United States v. 7108 W. Grand Ave., Chicago, Ill., 15 F.3d 632,
634 (7th Cir. 1994) (stating in the context of attorney error that liability for both
negligence and intentional misconduct is inclusive of an attorney’s gross negligence).
{14} 	A majority of federal circuit courts of appeal have held that a showing of gross
negligence by an attorney is an exceptional circumstance sufficient to set aside a

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default judgment. See Carter v. Albert Einstein Med. Ctr., 804 F.2d 805, 806 (3d Cir.
1986); Shepard Claims Serv., Inc. v. William Darrah & Assocs., 796 F.2d 190, 195
(6th Cir. 1986); Cmty. Dental Servs. v. Tani, 282 F.3d 1164, 1170 (9th Cir. 2002);
L.P. Steuart, Inc., 329 F.2d at 235; Primbs v. United States, 4 Cl. Ct. 366, 370 (1984).
There are two apparent rationales for this rule: (1) Federal Rule 60 is remedial, and
judgment by default “is an extreme measure and a case should, whenever possible, be
decided on the merits[;]” and (2) “[w]hen an attorney is grossly negligent, . . . the
judicial system loses credibility as well as the appearance of fairness, if the result
[was] that an innocent party is forced to suffer drastic consequences.” Cmty. Dental
Servs., 282 F.3d at 1170 (internal quotation marks and citation omitted).
{15} 	Our Supreme Court’s decision in Ferri falls somewhere between these two
approaches. On the one hand, Ferri recognizes the “general rule of attorney-as-agent”
principle underlying the Seventh and Eighth Circuits’ approach. 1995-NMSC-055, ¶¶
17, 19. But on the other hand, Ferri acknowledges “the harsh result of penalizing
diligent clients who were affirmatively misled by their attorneys into unintentionally
allowing their legitimate claims or defenses to be lost.” Id. ¶ 19. Our Supreme Court
has modified Ferri’s rule by requiring a party seeking to reopen a judgment based on
allegations of gross attorney negligence or misconduct to make two additional
showings: (1) that “the moving party had a legitimate claim or defense” and (2) “there

3Meiboom cites Ferri, requiring a moving party seeking to reopen a judgment
under Rule 1-060(B)(6) on grounds of gross attorney negligence to show that “the
moving party had a legitimate claim or defense[,]” Meiboom, 2000-NMSC-004, ¶ 32,
but the cited portion of Ferri concluded that a judgment based on a mistake of law
could only be reopened under Rule 1-060(B)(1), which provides for setting aside a
judgment based on a “mistake.” See Ferri, 1995-NMSC-055, ¶¶ 8-9. It is hard to
square Meiboom’s citation of Ferri as requiring a showing that a party has a
meritorious claim or defense in order to reopen a judgment under Rule 1-060(B)(6)
with the well-established rule that the grounds for reopening a judgment under Rule
1-060(B)(1) and Rule 1-060(B)(6) are mutually exclusive. See Ferri, 1995-NMSC-
055, ¶ 10 (stating that “we have long held that [Rule] 1-060(B)(6) provides relief only
for reasons other than those enumerated in [Rule] 1-060(B)(1) through (5)”).
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is little, if any, likelihood of prejudice to the non-moving party should there be a
vacation of the judgment[.]” Meiboom v. Watson, 2000-NMSC-004, ¶ 32, 128 N.M.
536, 994 P.2d 1154 (citation omitted).3 These two factors appear to be equity-driven,
requiring the district court to weigh one party’s loss of a legitimate claim or defense
against the prejudice that reopening the judgment would visit on the judgment
creditor. See Jackson v. Wash. Monthly Co., 569 F.2d 119, 122 n.19 (D.C. Cir. 1977)
(“[I]f [the] appellant is correct in his claims that [the] appellees contributed to the
delay in effectuating the purported settlement, and that for almost a year they allowed
him to believe that his suit was in good standing although they knew that it was not,
[the appellant] could not fairly be charged with any prejudice that [the] appellees
might have suffered”), cited in Ferri, 1995-NMSC-055, ¶ 18.
{16} 	Ferri and Meiboom give district courts latitude when asked to reopen a default
judgment 	based 	on 	allegations 	of 	gross 	attorney 	negligence. 	This 	approach

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acknowledges that application of Rule 1-060(B)(6) in this context entails application
of equitable considerations that led our Supreme Court to adopt Rule 1-060(B)(6) in
the first place. See Meiboom, 2000-NMSC-004, ¶ 31 (“Rule 60([B])(6) provides a
reservoir of equitable power to do justice in a given case[.]” (quoting Battersby v. Bell
Aircraft Corp., 1958-NMSC-135, ¶ 7, 65 N.M. 114, 332 P.2d 1028)). But this
approach requires courts to make a somewhat probing inquiry into the defaulting
party’s own diligence in pursuing a claim or preparing a defense.
{17} 	Ferri itself demonstrates the importance of creating a record in order to allow
meaningful appellate review of a district court’s decision to grant or deny a motion to
reopen a judgment under Rule 1-060(B)(6) for gross attorney negligence; in that case,
the Court reversed the district court’s denial of the appellants’ Rule 1-060(B)(6)
motion without inquiring into whether the record supported the district court’s
ultimate decision based on the district court’s failure to make findings of fact as to the
defaulting party’s diligence in pursuing her defenses. Ferri, 1995-NMSC-055, ¶ 20.
The Court remanded the case to the district court to conduct an evidentiary hearing
into these issues. Id. ¶ 20. The Court also stated that the district court could properly
consider evidence that the appellant herself had been given notice of various important
procedural developments in evaluating her diligence. Id.
{18} 	We conclude that this appeal requires a similar outcome. Although the record

4Ferri sets out the following list of non-exclusive facts that are relevant in
evaluating the defaulting party’s diligence: whether the party seeking to reopen the
judgment “actively and repeatedly attempted to communicate with her attorney;
[whether] her attorney misrepresented the status or nature of the case; [whether] she
relied on her attorney’s representations in good faith; and [whether] a reasonably
prudent person involved in such litigation similarly would have relied on those
representations and would not have made further inquiries or efforts to advance his
or her position.” Id., ¶ 20. The district court should consider these and other factors
it deems relevant in determining Defendants’ diligence in pursuing their case upon
remand.
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supports a finding of gross attorney negligence, there is little if any evidence of
Defendants’ personal acquiescence in their attorney’s conduct. In neither its oral
decision to grant Plaintiff’s motion for a default judgment nor its written default
judgment does the district court make any findings of fact as to whether Defendants
were aware of their attorney’s gross negligence. This alone requires us to reverse the
district court and remand for an evidentiary hearing for inquiry into Defendants’
complicity, if any, in their attorney’s intransigence and obstruction of the discovery
process. See id. (reversing the district court for failing to make a finding of fact as to
the defaulting party’s diligence in pursuing her defense and remanding for an
evidentiary hearing on that issue).4 As well, our own review of the record produces
inconsistency regarding the provision of notice to Defendants themselves and their
awareness of Mr. Everett’s conduct.
{19} 	On remand, Defendants bear the burden of proving that they were diligent in
pursuing their claims and that Mr. Everett affirmatively caused their default. See id.

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¶ 19 (“On remand, [the appellant] has the burden of demonstrating her diligence in
pursuing her case.”). We recognize that this inquiry is all the more difficult in cases
like this one where the attorney who brought about his client’s default continues to
represent the client past the entry of the default judgment. However, on appeal
Defendants have obtained substitute counsel; after remand, the district court can
properly consider any continued failure by the Defendants to participate in this
litigation in determining whether Defendants should be charged personally with their
previous attorney’s egregious conduct, and also make its own evaluation in the first
instance about the merits of Defendants’ defenses.
{20} 	The district court also failed to make a necessary inquiry into the prejudice that
Plaintiff would suffer if the default judgment were reopened. For example, Defendants
have asserted that Defendants Melville and Juanita Hedges filed for bankruptcy after
entry of the district court’s default judgment. On remand, the district court should
inquire into whether this or other developments subsequent to the district court’s entry
of default have increased or decreased the prejudice that Plaintiff would suffer if the
judgment were reopened. The district court should also consider the extent to which
Plaintiff’s own conduct brought about Defendants’ default (the district court suggested
to counsel for Plaintiff that he move to disqualify Mr. Everett from representing
Defendants; whether Plaintiff’s decision not to file such a motion contributed to

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Defendants’ failure to participate in the litigation is thus also a valid avenue of
inquiry).
{21} 	The district court’s denial of Plaintiff’s motion to set aside its default judgment
is reversed and this case is remanded for further proceedings.
{22} 	IT IS SO ORDERED.
_________________________________
J. MILES HANISEE, Judge
WE CONCUR:
_________________________________
MICHAEL E. VIGIL, Chief Judge
_________________________________
JAMES J. WECHSLER, Judge